US firms seek cover in limited liability
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Your support makes all the difference.THREE of the largest US accountancy firms have become limited liability partnerships in an effort to obtain more protection against rising negligence claims over audits and other advice.
The move comes as senior partners of Britain's second-largest firm, KPMG Peat Marwick, are investigating the implications of incorporation and Price Waterhouse, another member of the Big Six, is 'actively pursuing' it.
In the US, Coopers & Lybrand, Ernst & Young and Price Waterhouse changed their status under Delaware company law on Monday following last week's decision by the State of New York to recognise limited liability partnerships for accounting firms.
The other members of the Big Six, Arthur Andersen, Deloitte & Touche - the international name for Touche Ross - and KPMG are all considering similar moves. They may change within a month as industry figures suggest total claims are running at dollars 40bn and are costing one-tenth of accounting revenues to handle.
Although the development had been expected, its timing caught some British firms by surprise.
Last month, the 25 general partners who run KPMG decided that Colin Sharman, senior partner, and two colleagues would investigate the implications and report by the end of next month.
Ian Brindle, senior partner at the British arm of Price Waterhouse, regards incorporation as inevitable. A spokesman said: 'We think it will happen.'
Incorporation - which effectively makes partners like directors of limited liability companies and so not liable for all their personal assets if the organisation is sued - is not available in many US states. Limited liability partnerships do not exist in Britain.
While the change of status is prompted by the spiralling litigation, the firms stressed that it provided only restricted protection.
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